Chapter 8: Developing New Products and Managing the Product Life-Cycle

Question 1

Describe how new products could be obtained.

Answer 1

New products can be obtained through
1) acquisition - buying from others
2) new-product development - from scratch

Question 2

Why do new products fail?

Answer 2

They may fail because of overestimation of market size, design problems, incorrectly positioned, priced, or advertised, pushed despite poor marketing research findings, excessive development costs, competitive reaction.

Question 3

Describe the new-product development process.

Answer 3

The new-product development process involves 8 steps:
1) Idea generation - can be from both internal (company employees at all levels) and external sources (customers, competitors, distributors, suppliers, outsourcing)

2) Idea screening - spot good ideas & drop poor ones

3) Concept development & testing - product idea -> product concept -> concept testing

4) Marketing strategy development - describe target market, planned value proposition, etc. -> outline product’s planned price, distribution, marketing budget -> describes the planned long-run sales and profit goals

5) Business analysis - review of the sales, cost & profit projections; fit with company objectives?

6) Product development - concept -> physical product; subjected to physical tests

7) Test marketing - expensive and time-consuming; competitors may know; not needed for all products

8) Commercialization - decide on timing and where to introduce the product; develop a market rollout plan

Question 4

What are the three qualities needed for successful new-product developments?

Answer 4

1) Customer centered - focus on creating customer values
2) Team-based - various company departments work together to save time and increase effectiveness
3) Systematic - collect, review, evaluate and manage new product ideas

Question 5

Discuss the product life-cycle and strategies.

Answer 5

The product life-cycle involves 5 main steps:
1) Product development - sales are zero and investment costs mount

2) Introduction - goal = create awareness and trial;
sales = low; cost = high; profit = low/-; competitors = low
basic product; cost-plus pricing; selective distribution; heavy promotion

3) Growth - goal = maximize market share
sales = rapidly up; cost = average; profit = up; competitors = up
offer extension, service, warranty; penetration strategy; intensive distribution; reduce to take advantage of demand

4) Maturity - goal = maximize profits + defend market share
sales = peak; cost = low; profit = high
diversify brand and models; match or beat comp’s price; more intensive distribution; encourage brand switching
- modifying the market - look for new users and market segments; increase consumption e.g. Ovaltine
- modifying the product - add new features, improve style e.g iPhone 14
- modifying the marketing mix - cut prices, launch a better ad campaign, move into new market channels

5) Decline - goal = reduce expenditures + milk the brand
sales = declining; cost = low; profit = declining
phase out weak items; cut price; selective distribution; reduce promotion to the minimum
- maintain the product - reposition -> return to growth stage
- harvest the product - reduce cost -> profit in short-run
- drop the product